Correlation Between Kura Sushi and Wendys
Can any of the company-specific risk be diversified away by investing in both Kura Sushi and Wendys at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kura Sushi and Wendys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kura Sushi USA and The Wendys Co, you can compare the effects of market volatilities on Kura Sushi and Wendys and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kura Sushi with a short position of Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kura Sushi and Wendys.
Diversification Opportunities for Kura Sushi and Wendys
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kura and Wendys is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kura Sushi USA and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys and Kura Sushi is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kura Sushi USA are associated (or correlated) with Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Kura Sushi i.e., Kura Sushi and Wendys go up and down completely randomly.
Pair Corralation between Kura Sushi and Wendys
Given the investment horizon of 90 days Kura Sushi USA is expected to generate 2.04 times more return on investment than Wendys. However, Kura Sushi is 2.04 times more volatile than The Wendys Co. It trades about 0.2 of its potential returns per unit of risk. The Wendys Co is currently generating about 0.1 per unit of risk. If you would invest 6,659 in Kura Sushi USA on August 29, 2024 and sell it today you would earn a total of 3,879 from holding Kura Sushi USA or generate 58.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kura Sushi USA vs. The Wendys Co
Performance |
| Timeline |
| Kura Sushi USA |
| The Wendys |
Kura Sushi and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kura Sushi and Wendys
The main advantage of trading using opposite Kura Sushi and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kura Sushi position performs unexpectedly, Wendys can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wendys will offset losses from the drop in Wendys' long position.| Kura Sushi vs. Jack In The | Kura Sushi vs. Potbelly Co | Kura Sushi vs. BJs Restaurants | Kura Sushi vs. One Group Hospitality |
| Wendys vs. Jack In The | Wendys vs. Potbelly Co | Wendys vs. BJs Restaurants | Wendys vs. One Group Hospitality |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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